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How Is a Settlement Paid Out?

Experts In This Article

When Will I Get My Settlement?

Television and movies often portrayed legal matters as dramatic courtroom affairs. However, in truth, most legal claims are resolved before they ever see the inside of a courtroom. One of the most common types of resolution is a settlement, which involves an agreement for a lower amount of compensation than the value of the claim in exchange for avoiding the time and expense of litigation.

If an accident injured you, read on to learn how settlements are paid out. If you are in the Orlando area and need assistance with your claim, an experienced insurance dispute lawyers can explain the process in greater detail to you and review the services they can provide.

Types of Settlement Pay-outs

Each settlement agreement made between a personal injury claimant and an at-fault party’s insurer reflects the unique details of the case and the willingness of both sides to work together to reach a compromise. However, just as no two settlements are alike, the procedure for paying the settlement is also unique. Most settlements are paid either through a single lump-sum payment or through a structured settlement in which the claimant receives payments over a specified period.

Lump-Sum Settlements

Lump-sum settlements involve one payment of the entire agreed-upon compensatory amount. The advantage of a lump-sum settlement is that you can pay off your debts and your attorney at once and have the remainder of the payout to invest or place in an interest-bearing account. This gives you the option of increasing the money available to you. You also have the money available if you wish to pay off other bills, start a business, go back to school, or purchase a house.

Structured Settlements

Structured settlements involve receiving your compensation in monthly payments. The start and end dates are important in the scheme of a structured settlement, as these dates determine the duration in which you will receive the payments. Often these settlements provide an initial lump sum to pay for past-due medical expenses and other debts, with smaller payments occurring until the defendant pays the agreed-upon compensation. You can also earn interest from a structured settlement, which allows these payments to increase to an amount that can keep up with inflation.

A structured settlement can also provide a larger lump-sum payment later in the payout. This clause is often included in agreements involving personal injuries to a child, in which they receive regular payments during childhood and then a more considerable sum when they become adults.

While at the outset, most people would prefer a lump-sum settlement, you may prefer monthly, quarterly, or annual payments.

You can set your payments to increase over time, or they can increase due to interest.

The Process of the Settlement Payout

Unfortunately, settlement payouts take several weeks after parties have reached an agreement and the court approved the agreement. There is a process to the payout that involves the following steps.

Signing the Release

When you have reached a settlement agreement with the at-fault party’s insurance provider, the provider will ask you to sign several documents. One of those documents states that you release the at-fault party and their insurance provider from any future claims regarding the injuries you sustained in the accident. When a settlement involves a minor, the court must generally analyze and approve the agreement’s provisions.

The Insurance Company Sends the Check

After the at-fault party’s insurer has received your signed release and other documents, they will be ready to issue payment on the claim as stipulated in the settlement agreement. The defendant writes the check and sends it to the claimant’s attorney. The attorney then deposits the funds in a legal trust.

The lawyer deducts their payment from those funds per the contingent fee agreement you signed with your attorney when you began working together on your claim.

Most personal injury attorneys use a contingent fee billing method, which allows their clients to withhold payment for the attorney’s services until there has been a successful outcome to the claim. Instead, the lawyer receives a percentage of the settlement or award as payment. While that percentage can vary, it is generally about a third of the overall settlement.

Your Attorney Will Help Negotiate and Pay Debts

Often, by the time a personal injury claimant has obtained compensation for the expenses and impacts of their injury, their injury-related bills have become past due. It is pretty standard for liens to be placed on the settlement before you even receive it from creditors such as healthcare providers, government health insurance programs such as Medicaid, or group health insurance carriers.

Your attorney can negotiate with those creditors and can often reduce the amount of money you owe to them, allowing you to keep more of the settlement for yourself and your future injury-related impacts and expenses.

Once your attorney has negotiated a lower amount for those liens, they will pay the creditors from your settlement as outlined in your contingency fee agreement.

You Receive Your Money

Once all the liens, legal fees, and other expenses of your case have been satisfied, you and your attorney will meet to finalize your claim. You will need to sign additional paperwork, and you will receive the remainder of the settlement.

What Is the Average Settlement for a Personal Injury Claim?

Settlement Payouts

Settlements are unique to the case and the terms to which the parties involved in the claim agree. Because of this, there is no “average” settlement. However, several factors can impact the overall value of your claim and, subsequently, the amount you determine to be fair compensation for your injuries.

Those factors include:

  • The amount of insurance the at-fault party has. Insurance pays most personal injury settlements, but insurance policy limits often hamper the amount you can claim. With more than one source of liability, more money is potentially available, which is one of the main reasons your attorney will look carefully at your claim to identify all liable parties.
  • The severity of your injury. More severe injuries typically result in more compensation to account for future impacts and expenses such as loss of future earning capacity, ongoing medical treatment to address complications of the injury, and loss of the ability to participate in activities you formerly enjoyed.
  • The clarity of liability. An insurance adjuster is often more willing to make higher settlement offers if liability belonged to their insured. If there is any question about liability, the adjuster will attempt to reduce the claim amount to account for it. Adjusters typically prefer working directly with claimants who do not have attorney representation. These adjusters believe the claimant will be unaware of the laws that protect their right to compensation for their injury and will not yet fully realize the expenses and impacts of their injury.
  • Your patience during settlement negotiations. It is not overly challenging to receive a settlement offer from an at-fault party’s insurance provider. However, accepting an offer that fairly compensates you for your injury can be a complicated process, and it can last a while. Settlement negotiations typically begin with a demand from your attorney for the total value of your claim. If the insurance adjuster opts to pay, your claim will quickly resolve. If they opt to deny the claim, they must notify you of their reason. At that point, you and your attorney will likely consider filing your lawsuit. Otherwise, they can make an offer, and your attorney can negotiate to increase that settlement to an acceptable amount. Settlement negotiations do not have to end when you file a lawsuit. If your case is one of the 4 to 5 percent of personal injury claims that go to trial, settlement negotiations can continue even after the trial has begun, as long as the court has not yet decided the matter.


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What Is the Benefit of Obtaining a Negotiated Settlement Over a Court Award?

The settlement negotiation process provides several benefits to all parties involved in the personal injury claim in that it saves them time and expense involved with litigation. Most personal injury trials take a long time.

Besides saving money and time, a settlement can also provide the following benefits:

  • Both parties can have a voice in how the claim resolves. If you file the claim as a lawsuit, the court will decide who is liable, how much compensation they are responsible for paying, and how they will pay it. A settlement, however, provides plenty of leeway for choices all the way around. With the guidance of your attorney, you can determine what constitutes a fair settlement offer, choose how you want to receive your payments, and even include other provisions as long as the other side agrees.
  • Nobody can appeal the settlement. If the court renders the decision on your compensation and the at-fault party disagrees with the amount they must pay, they can appeal, which will result in even lengthier delays in receiving the compensation you deserve. However, once a settlement agreement is in place, you cannot ask for more money, and they cannot try to avoid paying the amount of compensation they agreed to in the settlement.
  • Less stress for you. Your personal injury attorney will be managing communication with the at-fault party’s insurance provider, including settlement negotiations. This means you can focus on your recovery and creating a quality of life despite the impacts of your injury.

How Does a Settlement Impact Your Taxes?

Many people worry about the taxes they will have to pay when they receive their settlement. However, according to the Internal Revenue Service, settlements for personal physical injuries are not income and therefore not taxed, with a few exceptions.

Let the Auto Justice Attorney Help You With Your Personal Injury Settlement

Insurance Claim Lawyer, Michael T. Gibson

Because out-of-court settlements resolve so many personal injury claims, you can rest assured that an experienced legal team has had ample experience with them.

Let a personal injury attorney explain the claims process and the services they can provide to assist you. While your claim may not settle out-of-court, the right attorney is committed to fighting for the maximum level of compensation for their clients, whether it is available through a settlement or litigation. Contact a personal injury attorney for a free consultation today.

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We know that accidents don’t always happen during business hours. That’s why our experienced lawyers are standing by, 24/7/365, to listen to your story, evaluate your claim, and help you decide what to do next. Call us now and we’ll see if we can pursue compensation for your injuries!

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